Students beat the market, Wall Street in 2013 investment returns for TVA

Students beat the market, Wall Street in 2013 investment returns for TVA

March 8th, 2014by Dave Flessner in Business Around the Region

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The investors live more than 600 miles away from Wall Street, haven't graduated from college and have little or no experience handling other people's money.

But the finance students at Tennessee Tech in Cookeville, Tenn., outperformed most of the money market pros last year, earning a return of nearly 48 percent on money they invested for the Tennessee Valley Authority.

"The students here are very technology-oriented and they do their homework," said Deryl Martin, a professor of finance who works with the students who won last year's investment challenge among Tennessee Valley colleges.

Martin said he's been a trader himself for 35 years, "but the students are the ones that make their pitches and vote on what investments to make."

Tennessee Tech, which has won the TVA Investment Challenge five times in 16 years, is one of 25 colleges and universities taking part in the program. The investment program started with $1.9 million in 1998 and the portfolio has since grown to $12 million.

Last year, the Standard and Poor's 500 Index produced a return of 32.4 percent, the biggest annual advance since 1998. Students in the challenge program collectively outperformed the S&P 500 by 1.4 percentage points, with a return of 33.8 percent.

In fact, 17 of the 25 participating universities outperformed the S&P 500 in 2013, with five schools producing returns of more than 40 percent.

The University of Tennessee at Chattanooga team had a 30.5 percent return for the year.

"It was a great year for our student investors even with the market's strong performance," TVA Chief Financial Officer John Thomas said.

Tammy Wilson, vice president and treasurer for TVA, said the college program "is an effective and innovative way to leverage our resources and offer experience and training to foster the next generation of financial leaders."

"We learn from them and they learn from us," Wilson said.

TVA has even hired some of the student investment managers, and Martin at Tennessee Tech said the investment experience has helped many students find sfinance jobs.

"There is no substitute for investing real money and experiencing what that is like day to day," he said.

TTU finance students have beaten the market average 75 percente of the time, most notably in 1999 when their stock picks jumped 141 percent compared to 19.5 percent for the overall S&P.

Last year, TTU bested the market with investments such as Tesla Motors, which tripled in value.

"It was a unanimous decision to buy Tesla last spring among the students and that proved to be a great investment," Martin said.

The TTU students also benefited by investments in biotech stocks, including Celgene, Biogen Idec and Gilead Sciences, as well as market winners like Bank of America, Boeing, Disney and Goldman Sachs.

The other top-performing schools in the competition last year were Alabama A&M University, with a 46.9 percent return, and East Tennessee State University, with a 46.4 percent return.